Universal Electronics Reports Second Quarter 2012 Financial Results

Aug 2, 2012 |

CYPRESS, Calif.--(BUSINESS WIRE)--Aug. 2, 2012-- Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and six months ended June 30, 2012.

“Our second quarter 2012 results were solid and in-line with our expectations for both the Business and Consumer Categories,” stated Paul Arling, UEI's Chairman and CEO. “We remain committed to pursuing our core philosophy of winning new customers and deepening existing relationships as well as introducing innovative, yet simple solutions to the ever-changing home entertainment environment.”

“We have established UEI as a leader in control technology, currently supplying approximately one-third of all remote controls shipped annually on the planet. Today, there are several new applications for our pervasive control technology, including smartphones and tablets. In addition, UEI is developing an integrated solution that recognizes all the various components in the audio video stack; automatically knows how they operate and how they are connected, and gives consumers the power to control all these devices using a traditional remote control or a more interactive control app on their tablet or smartphone. This solution exemplifies UEI’s commitment to innovation. We will continue to provide the products and technology that address our customers’ future needs–a strategy that has proven successful for years.”

Financial Results for the Three Months Ended June 30: 2012 Compared to 2011

Net sales were $116.7 million, compared to $121.7 million.
- Business Category revenue was $103.9 million, compared to $111.1 million.
  The Business Category contributed 89% of total net sales, compared to 91%.
- Consumer Category revenue was $12.8 million, compared to $10.6 million.
  The Consumer Category contributed 11% of total net sales, compared to 9%.
Adjusted pro forma gross margins were 28.5%, compared to gross margins of 28.9%.
Adjusted pro forma operating expenses were $25.5 million, compared to operating expenses of $25.6 million.
Adjusted pro forma operating income was $7.7 million, compared to operating income of $9.6 million.
Adjusted pro forma net income was $6.2 million, or $0.41 per diluted share, compared to net income of $7.1 million, or $0.46 per diluted share.
At June 30, 2012, cash and cash equivalents was $30.7 million.

Financial Results for the Six Months Ended June 30: 2012 Compared to 2011

Net sales were $220.4 million, compared to $227.5 million.
Adjusted pro forma gross margins were 28.1%, compared to gross margins of 27.7%.
Adjusted pro forma operating expenses were $50.3 million, compared to operating expenses of $50.0 million.
Adjusted pro forma operating income was $11.5 million, compared to operating income of $13.1 million.
Adjusted pro forma net income was $9.0 million, or $0.60 per diluted share, compared to net income of $9.7 million, or $0.63 per diluted share.

Financial Outlook

For the third quarter of 2012, the company expects net sales to range between $122.0 million and $128.0 million, compared to $123.5 million in the third quarter of 2011. Adjusted pro forma earnings per diluted share for the third quarter of 2012 are expected to range from $0.47 to $0.57, compared to earnings per diluted share of $0.53 in the third quarter of 2011.

For the full 2012 year, the company continues to expect net sales to range between $465.0 million and $485.0 million, compared to $468.6 million in 2011. Adjusted pro forma earnings per diluted share for 2012 are expected to range from $1.55 to $1.75, compared to adjusted pro forma earnings per diluted share of $1.55 in 2011.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, August 2, 2012 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its second quarter 2012 earnings results, review recent activity and answer questions. To access the call in the U.S. please dial 877-655-6895 and for international calls dial 706-758-0299 approximately 10 minutes prior to the start of the conference. The conference ID is 12768924. The conference call will also be broadcast live over the Internet and available for replay for one year at www.uei.com. In addition, a replay of the call will be available via telephone for two business days, beginning two hours after the call. To listen to the replay, in the U.S., please dial 855-859-2056 and internationally, 404-537-3406. Enter access code 12768924.

Use of Non-GAAP Financial Metrics

Non-GAAP gross margins, Non-GAAP operating expenses, and Non-GAAP net income and earnings per share are supplemental measures of the company's performance that are not required by, and are not presented in accordance with GAAP. The non-GAAP information does not substitute for any performance measure derived in accordance with GAAP. Non-GAAP gross profit is defined as gross profit excluding charges related to the write-up of inventory and depreciation related to the acquisition. Non-GAAP operating expenses is defined as cash operating expenses excluding acquisition costs, amortization of intangibles and other employee related restructuring costs. Non-GAAP net income is net income from operations excluding the aforementioned items. A reconciliation of Non-GAAP financial results to GAAP results is included at the end of this press release.

About Universal Electronics Inc.

Founded in 1986, Universal Electronics Inc. (UEI) is the global leader in wireless control technology for the connected home. UEI designs, develops, and delivers innovative solutions that enable consumers to control entertainment devices, digital media, and home systems. The company’s broad portfolio of patented technologies and database of infrared control software have been adopted by many Fortune 500 companies in the consumer electronics, subscription broadcast, and computing industries. UEI sells and licenses wireless control products through distributors and retailers under the One For All® brand name. For additional information, please visit our website at www.uei.com.

Safe Harbor Statement

This press release contains forward-looking statements that are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including the benefits anticipated by the Company due to the Company’s ability to gain market share; the Company’s ability to attract new customers and retain and expand our relationships with its existing customers; acceptance by consumers of the Company’s innovative tablet and smartphone applications; general economic conditions; the strength and growth prospects of the consumer electronics and broader retail industries; and other factors described in the Company's filings with the U.S. Securities and Exchange Commission. The actual results that the Company achieves may differ materially from any forward looking statement due to such risks and uncertainties. The Company undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.


UNIVERSAL ELECTRONICS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share-related data) (Unaudited)

	June 30, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	30,688		$	29,372
Accounts receivable, net		86,017			82,184
Inventories, net		77,798			90,904
Prepaid expenses and other current assets		3,773			3,045
Deferred income taxes		6,586			6,558
Total current assets		204,862			212,063
Property, plant, and equipment, net		78,025			80,449
Goodwill		30,795			30,820
Intangible assets, net		31,192			32,814
Other assets		5,285			5,350
Deferred income taxes		8,135			7,992
Total assets	$	358,294		$	369,488

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	45,462		$	55,430
Line of credit		3,000			2,000
Notes payable		10,000			14,400
Accrued sales discounts, rebates and royalties		6,317			6,544
Accrued income taxes		2,878			5,707
Accrued compensation		29,629			29,204
Deferred income taxes		49			50
Other accrued expenses		8,156			13,967
Total current liabilities		105,491			127,302
Long-term liabilities:
Deferred income taxes		11,276			11,056
Income tax payable		1,136			1,136
Other long-term liabilities		1,477			5
Total liabilities		119,380			139,499

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding		—			—
Common stock, $0.01 par value, 50,000,000 shares authorized; 21,331,074 and 21,142,915 shares issued on June 30, 2012 and December 31, 2011, respectively		213			211
Paid-in capital		177,496			173,701
Accumulated other comprehensive (loss) income		(555	)		938
Retained earnings		160,801			154,016
		337,955			328,866

Less cost of common stock in treasury, 6,358,515 and 6,353,035 shares on June 30, 2012 and December 31, 2011, respectively		(99,041	)		(98,877	)
Total stockholders’ equity		238,914			229,989
Total liabilities and stockholders’ equity	$	358,294		$	369,488

UNIVERSAL ELECTRONICS INC. CONSOLIDATED INCOME STATEMENTS (In thousands, except per share amounts) (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
		2012			2011			2012			2011
Net sales	$	116,704		$	121,746		$	220,436		$	227,458
Cost of sales		83,734			86,802			159,139			164,935
Gross profit		32,970			34,944			61,297			62,523

Research and development expenses		3,424			3,157			6,887			6,414
Selling, general and administrative expenses		23,080			23,477			45,632			45,264

Operating income		6,466			8,310			8,778			10,845
Interest expense, net		(51	)		(69	)		(88	)		(154	)
Other expense, net		(126	)		(384	)		(450	)		(418	)

Income before provision for income taxes		6,289			7,857			8,240			10,273
Provision for income taxes		(1,136	)		(1,736	)		(1,455	)		(2,325	)
Net income	$	5,153		$	6,121		$	6,785		$	7,948

Earnings per share:
Basic	$	0.35		$	0.41		$	0.46		$	0.53
Diluted	$	0.34		$	0.40		$	0.45		$	0.52

Shares used in computing earnings per share:
Basic		14,933			15,025			14,904			15,000
Diluted		15,048			15,407			15,080			15,395

UNIVERSAL ELECTRONICS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	Six Months Ended June 30,
		2012			2011
Cash provided by operating activities:
Net income	$	6,785		$	7,948
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization		8,525			8,588
Provision for doubtful accounts		37			237
Provision for inventory write-downs		1,623			2,099
Deferred income taxes		6			645
Tax benefit from exercise of stock options and vested restricted stock		(72	)		374
Excess tax benefit from stock-based compensation		(30	)		(344	)
Shares issued for employee benefit plan		468			396
Stock-based compensation		2,337			2,085

Changes in operating assets and liabilities:
Accounts receivable		(4,678	)		262
Inventories		10,630			(11,409	)
Prepaid expenses and other assets		(711	)		(78	)
Accounts payable and accrued expenses		(13,523	)		(2,514	)
Accrued income taxes		(2,796	)		(3,696	)
Net cash provided by operating activities		8,601			4,593

Cash used for investing activities:
Acquisition of property, plant, and equipment		(4,261	)		(5,554	)
Acquisition of intangible assets		(430	)		(513	)
Net cash used for investing activities		(4,691	)		(6,067	)

Cash used for financing activities:
Issuance of debt		8,000			—
Payment of debt		(11,400	)		(14,400	)
Proceeds from stock options exercised		1,386			1,212
Treasury stock purchased		(486	)		(3,500	)
Excess tax benefit from stock-based compensation		30			344
Net cash used for financing activities		(2,470	)		(16,344	)

Effect of exchange rate changes on cash		(124	)		1,469

Net increase (decrease) in cash and cash equivalents		1,316			(16,349	)

Cash and cash equivalents at beginning of period		29,372			54,249

Cash and cash equivalents at end of period	$	30,688		$	37,900

Supplemental Cash Flow Information — There were income tax payments of $4.2 million and $6.4 million during the six months ended June 30, 2012 and 2011, respectively. There were interest payments of $0.1 million and $0.2 million during the six months ended June 30, 2012 and 2011, respectively.


UNIVERSAL ELECTRONICS INC. RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS (In thousands, except share-related data) (Unaudited)

	Three Months Ended									Three Months Ended
	June 30, 2012									June 30, 2011
							Adjusted									Adjusted
	GAAP			Adjustments			Pro Forma			GAAP			Adjustments			Pro Forma

Net sales	$	116,704		$	—		$	116,704		$	121,746		$	—		$	121,746
Cost of sales ⁽¹⁾		83,734			(277	)		83,457			86,802			(277	)		86,525
Gross profit		32,970			277			33,247			34,944			277			35,221

Research and development expenses		3,424			—			3,424			3,157			—			3,157
Selling, general and administrative expenses ⁽²⁾		23,080			(965	)		22,115			23,477			(1,026	)		22,451

Operating income		6,466			1,242			7,708			8,310			1,303			9,613
Interest expense, net		(51	)		—			(51	)		(69	)		—			(69	)
Other expense , net		(126	)		—			(126	)		(384	)		—			(384	)

Income before provision for income taxes		6,289			1,242			7,531			7,857			1,303			9,160
Provision for income taxes ⁽⁴⁾		(1,136	)		(238	)		(1,374	)		(1,736	)		(296	)		(2,032	)
Net income	$	5,153		$	1,004		$	6,157		$	6,121		$	1,007		$	7,128

Earnings per share diluted	$	0.34		$	0.07		$	0.41		$	0.40		$	0.06		$	0.46

	Six Months Ended									Six Months Ended
	June 30, 2012									June 30, 2011
							Adjusted									Adjusted
	GAAP			Adjustments			Pro Forma			GAAP			Adjustments			Pro Forma

Net sales	$	220,436		$	—		$	220,436		$	227,458		$	—		$	227,458
Cost of sales ⁽¹⁾		159,139			(554	)		158,585			164,935			(554	)		164,381
Gross profit		61,297			554			61,851			62,523			554			63,077

Research and development expenses		6,887			—			6,887			6,414			—			6,414
Selling, general and administrative expenses ⁽³⁾		45,632			(2,197	)		43,435			45,264			(1,659	)		43,605

Operating income		8,778			2,751			11,529			10,845			2,213			13,058
Interest expense, net		(88	)		—			(88	)		(154	)		—			(154	)
Other expense, net		(450	)		—			(450	)		(418	)		—			(418	)

Income before provision for income taxes		8,240			2,751			10,991			10,273			2,213			12,486
Provision for income taxes ⁽⁴⁾		(1,455	)		(542	)		(1,997	)		(2,325	)		(441	)		(2,766	)
Net income	$	6,785		$	2,209		$	8,994		$	7,948		$	1,772		$	9,720

Earnings per share diluted	$	0.45		$	0.15		$	0.60		$	0.52		$	0.11		$	0.63

____________

(1) To reflect depreciation expense for the corresponding periods relating to the mark-up in fixed assets from cost to fair value as part of the Enson Assets Limited acquisition.

(2) To reflect $0.7 million of amortization expense for the three months ended June 30, 2012 and June 30, 2011, relating to intangible assets acquired as part of acquisitions. In the second quarter 2012 and 2011, there were additional costs incurred relating primarily to other employee restructuring costs.

(3) To reflect $1.5 million of amortization expense for the six months ended June 30, 2012 and June 30, 2011, relating to intangible assets acquired as part of acquisitions. For the six months ended 2012 and 2011, there were additional costs incurred relating primarily to other employee restructuring costs.

(4) To reflect the tax effect of the adjustments.

Source: Universal Electronics Inc.

UEI
Paul Arling, 714-820-1000
or
IR Agency
Becky Herrick, 415-433-3777

News Details

Universal Electronics Reports Second Quarter 2012 Financial Results

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